How Going Lean in a Startup Changes Everything

Ever since it was announced that the startup ecosystem in India is ranked 3rd largest in the world with over 4, 200 companies commencing operations in 2015 alone, it put onus on the nation as a fertile breeding ground for home grown startups. With a singular vision to seek unexplored markets & create new ventures based on such research, many entrepreneurs – young or old –embarked on this journey, enabled by a startup-friendly atmosphere and better access to technology.

The sudden boom within this realm also grabbed the attention of many enablers, who were compelled to facilitate various initiatives that can benefit up-and-coming startups every step of the way.The ‘Startup India’ campaign launched by Prime Minister Narendra Modi last year is specifically aimed at promoting and developing entrepreneurship & innovation in hopes of making India a nation of ambitious job creators.

According to a report by NASSCOM, the startup ecosystem in India is growing rapidly, with over 40% growth in number of startups as compared to 2 years back. Additionally, since this industry plays a vital role in job creation, generating over 80,0000 – 85,000 jobs, it is estimated that these numbers will climb to a whopping 250,000 jobs in the next four years. Among the fastest growing categories within this realm is E-Commerce – emerging as one of the top funded in B2B domain. A prominent sub-category within this is that of Hyperlocal service startups which witnessed huge investment growth in 2015.

However, despite its success rate there are various factors which hinder the progress of many startups, with some failing to continue operations beyond the first year. Some reports state that this ecosystem witnesses a failure rate of around 25%, however the exact numbers may vary depending on different industries and sectors. Also, failure in this domain can have a demoralizing effect on the entrepreneur who – along with his/her employees, worked tirelessly and tried hard to keep their business afloat. Although these figures are limited to the ones who couldn’t achieve any business growth over the years, there are many successful ones as well who have begun to witness new challenges that can become potential hurdles in the long run.

Consider this: Tried and tested guidelines which were considered to be an integral aspect for attaining success in the realm of startups are now considered almost obsolete. According to Harvard Business Review, the perception has always been that an entrepreneur should create a comprehensive plan that properly defines each step, such as –scope of opportunity and developing solutions to possible challenges on the way. The founder is expected to figure out every little detail even before he/she executes that idea. Once that is done, the next step is to convince potential investors to provide funding, and subsequently develop a product which they hope their target audience will love.

However, contrary to popular belief coming up with the ‘Perfect Business Plan’ is apparently just an illusion. To design a new product, developers need to invest a lot of time with little to no input from consumers. They receive feedback only when the product is launched following which the sales team takes over to sell it among the target audience. It is only after a certain period of time when they find out that their intended customers do not require most of their product’s features.

Furthermore, the HBR stated that most startups struggle in the long run since they have no set sustainable long term goals. The magazine also identified some key reasons why growth in startups was restricted in addition to failure rate. Let us look at some of them:

The high cost of getting the first customer and the even higher cost of getting the product wrong.

Long technology development cycles.

The limited number of people with an appetite for the risks inherent in founding or working at a start-up.

The structure of the venture capital industry, in which a small number of firms each needed to invest big sums in a handful of start-ups to have a chance at significant returns.

In order to prevent future startups from making these similar errors, a new method was proposed that could improve both business & product development cycles. Pioneered in 2008 by noted Silicon Valley entrepreneur Eric Ries, the ‘Lean’ method was specifically created with an aim to shorten the time an entrepreneur invests during the product development cycle. According to his claims, Ries stated that this method is an amalgamation of business-hypothesis-driven experimentation, iterative product releases, and validated learning. Initially developed to maximize efficiency in tech companies, the ‘Lean’ method can be applied in any aspect of business.

Due to heavy layoffs, many industry leaders are constantly facing heat while mid-segment players are only just beginning to realize their mistakes which they unknowingly committed to beat competition in the market. Therefore, more and more entrepreneurs are now compelled to act fast and adopt a leaner and meaner strategy as reparatory measure to attain business sustainability, giving rise to the global adoption of ‘Lean’ method.

Now, let us explore how the Lean approach can benefit the startup ecosystem:

Reduction in unnecessary investment: The ‘Lean’ approach can help in significantly reducing overproduction, waiting period, and any defected products.

Customer satisfaction: The foremost principle of ‘Lean’ is to determine what the consumer wants and then developing a product that satiates that need. A satisfied customer will keep coming back, bringing both value, loyalty, and goodwill for the company.

Better inventory management: Although some people may argue that the more inventories you have, the better your business will be, no one really notices the hidden issues with this practice. While being well-stocked is an advantage, over inventorying can incur heavy financial loss owing to unnecessary investment in stock management and transportation. Therefore, ‘Lean’ can help in enabling better management by eliminating excess stock.

Increase in profit: Since the ‘Lean’ method helps in reducing unnecessary costs to the company, this can directly affect its profits as the enterprise wouldn’t have to include these costs in the total selling price of the product. The result: better pricing of products, increase in sales, and thus, increase in profits.

Despite set goals, an entrepreneur should be prepared for any kind of challenges that can slow down business growth. So, let us see how budding entrepreneurs can implement the ‘Lean’ approach to their business in order to achieve maximum traction. Following are some ways in which one can aim to achieve a ‘Lean’ startup:

Understand the concept of ‘Lean’: Prior to adopting this method for business growth, brush up on this method’s principles and all that can be expected if one chooses this approach. It is important to bear in mind that this method reduces waste, that doesn’t mean an entrepreneur can go overboard while cost cutting and eliminate essential aspects of the business. It is advisable to balance every element without affecting long-term goals.

Focus on Simplicity: Before developing your final product, always prioritize the customer’s interest. Create a product that resonates with the consumer and one that can be easily used by them. Entrepreneurs should question themselves whether they themselves will buy the product which is being developed by them. Instead of focusing on multiple features, build a prototype that only incorporates necessary elements.

Never stop learning: It may seem like an unnecessary task, but it can surely benefit any individual or entrepreneur in the long run. No one is perfect, but a person can gain the knowledge they seek in any domain. Failure is a part of life and so, if something doesn’t work, analyze those mistakes and learn from them. An entrepreneur and his team should continuously strive to create an open atmosphere and learn from each other in order to develop a successful business.

Invest in workforce: The most integral aspect of any organization is its skilled personnel. They are the ones who work the hardest to make any venture a success. It is extremely crucial for an entrepreneur to invest in their employees and help them reach their full potential. When going ‘Lean’, it is the quality of one’s workforce that can determine if the company can sustain growth or not. Therefore, as an entrepreneur, one should make an effort to understand both the strength and weakness of his/her employees and assign tasks based on their skills.

There are many startups in India which have or are attempting to fully utilize the ‘Lean’ method to further their business goals. For example: There are some hyperlocal E-commerce startups which have been able to successfully adopt this method by meticulously optimizing every business aspect. Therefore, it can be safely concluded for now that going ‘Lean’ in a startup can certainly change the startup landscape –enabling an ecosystem that can achieve sustainability with minimal wastage of resources.

Disclaimer: This is a guest column. The statements, opinions and data contained in these publications are solely those of the individual authors and contributors and not of iamwire and the editor(s).

Amit Singh is the Founder & CEO of AllSuperMart.com, an online marketplace where hyperlocal vendors can sell their products online and gain virtual presence. His chief responsibilities involve development and expansion of the business to accelerate its growth. His vision is to provide a unique shopping experience to customers from all walks of life, and in the process, achieve optimal customer satisfaction.